After You Have Been Pre-Approved

This page is designed to give you tips to help you to avoid making some common mistakes after mortgage pre-approval.

First home buyers will also get a basic understanding of the home buying process.

If you don’t do your homework properly or don’t have professional advisers (like us) then you risk making costly mistakes.

Beginning to look for a property

We recommend that you use several different sources to look for properties for sale:

• realestate.com.au
• domain.com.au
• Call real estate agents directly.

Believe it or not, there are still quite a few properties that aren’t advertised online!

You can find these properties by talking to the real estate agents directly, by looking at their agency windows or by checking the real estate section of your local newspaper.

Some properties are only advertised on either
realestate.com.au
or
domain.com.au, not in both. So it’s important to use both websites when searching for property.

If you want to get the best possible results then consider the following tips:

• Real estate alerts:It’s essential that you sign up to alerts on real estate websites so that you can be notified of new listings in the area.
• Research property prices: Print off a list of comparable sales & spend a day going around the area that you’re going to buy in, so that you know the market. You can learn more on our how to value a property page.
• Go to lots of inspections / auctions: Take the time to inspect as many properties as you can. You’ll begin to learn what to keep an eye out for. You should go to some auctions to see how they work before you bid at one yourself.
• Keep your options open: Many people often end up buying something completely different to the property that they initially intended to buy. Don’t ignore properties outside the area you are looking, or that don’t exactly meet your criteria. If you’re looking in a high demand area then you should also go to some inspections in neighbouring suburbs, that may have less competition. We’ve found that many people end up buying in the suburb next door to their preferred suburb.

Fast Track to Approval: Your Home Loan Checklist

A well-curated checklist to improve your chances of a home loan approval.

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Bad agents can be your best friends

If you come across an agent who doesn’t return phone calls, has inaccurate listings or is unprofessional then it’s important that you ask to see all the properties that they have for sale.

In many cases, they have one or two listings that have been sitting there for months without a single person inspecting them because they’ve failed to effectively advertise the property.

Unprofessional agents just want to get the sale completed, they aren’t interested in getting the best price for the vendor. In many cases, they’ll let you know what price you should offer or will tell you about the vendor’s circumstances.

Not all properties are OK for the lender!

Did you know that the banks don’t accept some properties as security for a home loan? So even if you get pre-approval, and you decide to buy a certain property type, your loan may be declined.

This is because a pre-approval is always subject to the lender accepting the property that you buy as security. Where you have concerns, it’s best to check with us before making any offers.

As a general rule, the property you’re planning to buy must meet these criteria:

• Less than 50 m² internally: If your unit is less than 50 m² excluding balconies and car spaces then some lenders may not accept it as security for a loan.
• Land size over 2 ha: If the land is greater than 2 hectares, some lenders may not accept it as security for a home loan. This guideline varies significantly between lenders, with some accepting up to 50 ha or more.
• Standard title & zoning: If the property you’re buying isn’t zoned for residential use or isn’t torrens, freehold or strata title (or leasehold in the ACT only) then please check with us before proceeding. Company title & stratum title can be accepted by some lenders if the LVR is reduced.
• In a major town or city: If you’re buying in a remote area or small country town then some lenders will reduce the maximum LVR of your loan. You can use our postcode calc to work out if you’re buying in a high risk area.
• No rental guarantees / vendor incentives: If the seller is offering a rental guarantee, a rebate at settlement or has included furniture in the purchase price then please check with us before proceeding. In many cases, the bank valuer may value the property for less than the purchase price.
• In a good condition: Banks may not accept the property if it’s not in good condition. As a general rule of thumb, if the property could not be rented out as it is now, then it’s not in good enough condition.
• Nothing unusual: If there’s anything unusual about the property you’re buying then please check with us before proceeding.

There is a full list of the types of properties that are considered to be “non standard” on our property types page.

We recommend that once you find a property you like, please email your mortgage broker with a link to the listing for the property in Domain or Realestate.com.au.

We can then inform you if there appears to be any aspects of the property that may be an issue for some lenders.

Choosing a conveyancer

While looking for a property, you’ll need to find a conveyancer or solicitor to help you with the legal documents associated with the purchase. A good conveyancer will ensure that you’re protected & well advised throughout the process.

We have a list of recommended conveyancers & solicitors. However, we don’t have one for every state. Please use a good conveyancer, not the cheapest one you can find! They’ll be assisting you with a very important transaction and their expertise is essential.

A solicitor & a conveyancer essentially do the same thing, although they do have slightly different qualifications. In WA, you’ll need what’s known as a Settlement Agent who will handle the transfer of the property into your name.

Making an offer

Once you’ve found a property you want to buy, we recommend that you discuss the property with your conveyancer and seek their advice.

Although we have some basic tips below, it can’t be substituted for specialist advice from a conveyancer who works in this field.

• Ask the agent “What price would the vendor accept?” before you make an offer. If the agent isn’t very good then they may let you know that a low offer would be fine. It may also depend on the urgency involved in the sale. If the vendors want a quick sale, the agent may disclose this to you.
• Never let the agent know your borrowing capacity or what your maximum purchase price is.
• Stay for the entire duration of each open for inspection, that way you can see how much competition you have.
• Never offer the vendor’s asking price.

As a general rule, you should offer 10% below their asking price. However, this varies significantly between markets.

It can be very difficult to negotiate a lower price in high demand markets close to the CBD or near the beach. Agents often have a “take it or leave it” approach & refuse to bargain.

In quieter markets in some of the outer suburbs, you may be able to put in an offer 15% or so below their asking price.

The conditions on your offer

We recommend that our customers ask for a two-week cooling-off period or finance clause to allow time for the bank to arrange a valuation and the final approval. Although banks usually take far less than two weeks, it’s better to allow extra time just in case they make an error with their processing.

In some states, it’s mandatory to have a two or three-week finance clause to allow you, as the purchaser, to sort out your final loan approval before you’re committed to the purchase.

However, in very competitive markets such as Sydney’s suburbs of Mosman or Bondi, it can be near impossible to get the agent to agree to have any cooling-off period at all!

You should talk to your conveyancer to confirm which conditions should be included with your offer.

The list below contains our suggestions:

• 2-week cooling-off period (QLD: 2-week finance clause, WA: 3-week finance clause).
• Subject to a pest inspection that’s acceptable to the purchaser.
• Subject to a building inspection that’s acceptable to the purchaser.
• Subject to a strata report that’s acceptable to the purchaser (strata title properties only, such as units and townhouses).

What if you can’t get the agent or vendor to agree to a cooling-off period or finance clause?

This means that there’s some risk involved in purchasing the property.

It’s possible that the lender may not formally approve your loan, and you may be unable to complete the purchase. This means that you’ll lose your deposit.

Unfortunately, for some purchases, taking this risk is unavoidable. If you can’t get a cooling-off period, then please talk to your conveyancer and your mortgage broker to discuss the risks involved before proceeding.

Inspections & reports

Your conveyancer will know which inspections and reports you should order for your property. We strongly recommend that you order all available reports; the cost of an inspection is far less than the cost of buying a property with termites!

• Pest inspection: This checks if the property is currently infested with termites, if termite treatment has been carried out in the past, and if there’s a risk of future pest infestations. Often, the building inspector can carry out a pest inspection at the same time as a building inspection.
• Building inspection: This checks for any potential faults with the building itself. Building reports point out every possible fault with a property, so they often look worse than they actually are. Expect older buildings to have several minor faults, which is normal.
• Strata report: This checks to make sure that the strata corporation has been well-run. Often, there’s no advice given with the report, just a copy of the strata financial statements and minutes of the most recent meetings. You’ll only need this for
  strata title properties
  such as units and townhouses.

Your conveyancer or solicitor can usually recommend a good building inspector and strata inspector. We recommend that you go to the property with the inspector so they can explain everything to you in more detail.

You’ll probably be inspecting the roof and other areas, so it’s advisable to wear older clothing.

Don't commit to buy just yet!

Before you pay your deposit and commit to purchasing the property, please call your mortgage broker and conveyancer to confirm that it’s OK to proceed.

Buying at auction

In Melbourne, almost all properties are sold at auction, whereas in most other cities, auctions are only used for high demand properties.

If you buy at an auction then you’ll be committing to buy before you have formal loan approval, so you’re taking a risk!

You’ll need to order your inspections before you go to the auction, and if you don’t win the auction then you have lost the money for your inspections.

In some states, the vendor will order the inspections and provide them to the prospective buyers so that they don’t all need to order their own reports.

You must talk to your conveyancer about how auctions work in your state & the risks associated with buying at an auction.

Paying your deposit

Most people negotiate to pay a 5% or 10% deposit as a cheque. The funds are then held in the agents trust account or a solicitors trust account until settlement. Again, this varies depending on the state you’re in. It’s common in QLD & WA for the deposit to be much smaller than 5%.

How can you pay a 5% deposit if you’re borrowing 100% of the property value with a guarantor loan? You can get what’s known as a deposit bond, which is a guarantee to the vendor that you’ll complete the purchase. A deposit bond will usually cost you around 1.2% of the amount of the deposit, as a once off fee.

The vendor will need to agree to accept a deposit bond instead of a cash deposit. If you’re going to an auction then request this via your conveyancer, several days before the day of the auction.

Please use our deposit bond calculator to compare deposit bond quotes from several insurers and then contact one of our mortgage brokers to apply. Call 1300 889 743 or complete our free assessment form today!

After your offer is accepted / You have won an auction

Once you’ve successfully won an auction or have had your offer accepted, it’s time for us to help arrange your formal loan approval!

Firstly, send us a copy of the contract of sale:

• NSW – Front page
• QLD – First two pages
• VIC – Particulars page
• SA – First two pages
• WA – Offer & acceptance (both pages)
• ACT – Front page
• NT – All pages
• TAS – Front page

In addition to the contract, we’ll also need some other documents:

• A receipt for the deposit you’ve paid to the agent.
• A letter from the agent confirming the market rent for the property (if it will be an investment property).
• Any documents that the lender requested as a condition on your pre-approval.

Still confused?

If you have any questions about the process of buying a property then please ask your conveyancer as they are the experts in this area.

If you have any questions regarding how a loan process works or how long it will take to get home loan approval then please call us on 1300 889 743, fill in our free assessment form or post your question on the Disqus section below.